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Live by the celebrity CEO, die by the celebrity CEO?

Apple CEO Steve Jobs

Robert Galbraith/Reuters

Have you heard? Apple Inc. has liver disease.

Not really. But when Steve Jobs e-mailed his employees on Monday morning to announce he would be taking a leave of absence because of health issues, Apple fanboys and investors reacted as if he had declared the iPad2 was at a Swiss clinic being treated for hepatitis and he couldn't say exactly when it might be ready to accept visitors.

Chalk that up to Mr. Jobs. For he isn't just a brilliant engineer; he's also a savvy marketer who has encouraged the intertwining of his persona with the Apple brand. Mainly, it's been a canny and successful fusing: the jeans-and-black-turtleneck rebel leading the good fight against bland, unfriendly, corporate computing with his humanist technology. Since he reassumed leadership of the company in the mid-1990s, Apple's share price has gone up about 55,000 per cent. Meanwhile, his own net worth is in the neighbourhood of about $5-billion.

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All of which makes Apple an excellent case study in the benefits of twinning a company's brand with that of its charismatic chief executive officer. Now, though, it risks being a case study in the potential downside of that strategy.

It's not alone. Some of the strongest brands use celebrity CEOs to connect with consumers, from Oprah Winfrey and Martha Stewart to Bill Gates. Investors flocked to Facebook, Twitter and Google in part because of the celebrity of their founders: Mark Zuckerberg, Biz Stone, and Sergey Brin and Larry Page, respectively.

The temptations for a company to build its CEO into a brand are obvious, and multilayered. "When you have somebody like Steve Jobs or Richard Branson, their exploits are automatically something that are of interest to the media in ways that even a new product launch isn't," notes Eileen Fischer, a professor of marketing at York University's Schulich School of Business. "It generates that higher visibility for the brand by the person."

But it's more than that. "Having a persona paired with your product helps to create that elusive authenticity for a brand," Prof. Fischer adds.

In Canada, the appeal of that authenticity worked well in the almost two decades that Dave Nichol headed Loblaw Cos. Ltd. Like a fine-food god, he created the President's Choice line of products in his image, and popularized it with his evangelistic "Insider's Reports," and a string of TV and radio commercials. But when he departed in the mid-1990s, the company fumbled the transition, and spent years trying to connect with consumers in the same way.

Apple isn't the only company struggling over the need to one day elegantly decouple its brand from that of its mortal CEO. Warren Buffett has controlled Berkshire Hathaway Inc. for more than 45 years: It's his life's work. "He has often said he views Berkshire as part of himself, that his ego is wrapped in Berkshire, and he almost has trouble distinguishing between the two," says author Alice Schroeder, who wrote The Snowball: Warren Buffett and the Business of Life. "It's part of his identity."

Ms. Schroeder suggests that Mr. Buffett would blanch at the notion that he branded himself, since the term "implies perhaps manipulation." Still, there's no doubt he was aware of the importance of image, from the very beginning of his investment management business. "He's someone who thinks very clearly about sculpting the message, and he repeats the same things - the same stories, the same anecdotes, the same phrases, over and over - and has for decades."

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The Buffett story offers a glimpse into the unexpected ways that brands hold a peculiar kind of power over people: It isn't only consumers who fall under their spell. Ms. Schroeder says the Oracle of Omaha realized in the 1980s that publicizing himself and his company as prudent, caring guardians of other people's money and property could help disarm the leaders of Berkshire Hathaway's takeover targets and make them more willing to sell.

"When he started to realize Berkshire was in the business of buying other companies, and they weren't necessarily local Omaha companies, the brand began being known to owners of family-held businesses as a good boss - as somebody who would take care of their company, their baby," Ms. Schroeder says. "The personalization of it has given the company a warm image, and it's attracted customers and it's attracted investors, and a lot of people like it."

Here's where I should probably don a hair shirt and mention a 2004 paper published in Strategic Management Journal. In " Believing One's Own Press: The Causes and Consequences of CEO Celebrity," University of Colorado assistant professor Mathew Hayward and two co-authors suggested that journalists are responsible for the phenomenon of the celebrity CEO, because of both our desire to tell simple, compelling stories and our cognitive constraints. (That is: We're unwilling or unable to grasp all of the factors that go into a company's success or failure, so we ascribe good or bad fortunes to a single individual. After all, if we were able to grasp the intricate interplay of dynamics that make a company soar or crash, we'd be business professors or highly paid consultants. Or, maybe, celebrity CEOs.)

The paper argued that a CEO and his or her board are as susceptible to positive coverage as are members of the public, which is a little like the Wizard of Oz coming to believe he's actually magical. "It takes an incredible ego to accomplish magnificent things, and when people do it, they're justly proud of what they've done - and some of them personalize it," Ms. Schroeder notes. But in believing their own press, they also risk simplifying their own challenges.

Still, if journalists want to tell simple stories, highly paid traders can also seem cognitively constrained. It appears that investors who fled Apple at the opening bell on Tuesday were likely overreacting, just like investors who sold shares of Martha Stewart Living Omnimedia Inc. when the Connecticut diva was implicated in an insider trading scandal. After all, the public's loyalty to Ms. Stewart and her brands remained more or less constant, even as she went to prison. It turned out, the brand and its product lines ran deeper than Ms. Stewart's tightly smiling face.

That may be the case for Apple, also. "Out of curiosity, I asked my students the other day, 'Do you think you're going to be worried if the next iPad is going to be a great product because Steve Jobs is stepping aside?' " Prof. Fischer notes. "They looked at me like I was nuts. The attention placed on him is certainly a benefit to the brand, but I don't think consumers are naively making assumptions that he's controlling the whole thing."

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